Jerry Brown's gender quota bill faces legal hurdles

Governor Jerry Brown on Sunday signed a law making California the first state to impose gender quotas on company boards, but he nonetheless acknowledged that the highly controversial law might never come into effect.

Senate Bill 826 should be immediately challenged for the sake of equal protection with a view to establishing a quota system that will compel public corporations to have their directors appear on the basis of their sex.

In addition, the newly signed bill, which provides for financial penalties for companies that do not meet quotas, applies to all California-based firms, even if they are incorporated outside the state, which constitutes a new foundation of litigation.

As Kimberly Krawiec, a professor of law at Duke University of Law, said, "let the lawsuits begin."

In this case, why sign the bill? Mr. Brown said he was influenced by "the recent events in Washington, DC," apparently making reference to allegations of sexual assault against Judge Brett M. Kavanaugh, who delayed the confirmation process by the Court. Supreme Court of the United States.

"There have been many objections to this bill and serious legal problems have been raised," said the Democratic governor in his signing statement. "I do not minimize the potential flaws that could prove fatal to its final implementation."

"Nevertheless, recent events in Washington, DC and beyond clearly show that many do not understand the message," Brown said.

The measure will require all publicly traded companies based in California to have at least one female board member by the end of 2019 and at least two women serving on the five-member board by the end of 2021. The boards of directors of six or more members would be: obliged to have at least three women there by then.

Under the law, "woman" includes men who identify as women. Companies that do not reach quotas are subject to fines of up to $ 300,000 per violation.

"With the support of the governor at SB 826 today, another glass ceiling has been broken and women will finally have a place at the table in the boardrooms", has said Democratic Senator Hannah-Beth Jackson, sponsor of the bill.

Proponents argued that companies had adopted the law by failing to diversify on their own. Women occupy 15.5% of the seats on the board of California-based companies in the Russell 3000 Index, and about 25% do not have women directors.

Others warned that heavy government intervention is not the answer and could turn against women who are climbing the company ladder.

"No doubt many will assume that these new women council members were not selected on merit, but to meet the mandatory quota," said Carrie Lukas, president of the Independent Women's Forum, in a Monday column for Forbes. "Rather than helping women progress, the quota could tarnish the achievements of women who are climbing the corporate ladder."

The law has an unlimited number of potential challengers. At least two dozen business groups, led by the California Chamber of Commerce, opposed the bill, saying companies should be able to determine their own board of directors and that the priority given to women would hinder broader efforts for diversity.

"The CAA opposes Standard 8236 because it is probably unconstitutional and favors a diverse workforce," said Chris Micheli, spokesman for the ambulance association, at the San Francisco Chronicle. . "Gender is an important aspect of board diversity, but the state should not elevate that element above all other aspects of diversity."

The debate on the bill aimed to determine whether women were actually improving the performance of the company. Proponents of the legislation argued that women are "good for business," noting that studies showing that corporate performance is strong are "associated" with the presence of women directors.

"We are confident that this legislation will be a catalyst for greater prosperity through the thoughtfulness and contributions of women's unique perspective," said Mindy Bortness, President of the National Women Owners Association. California company.

At the same time, publicly traded companies have reason to be wary, given the poor experience of Norway.

After the adoption by the Norwegian Parliament of a law on gender quotas in 2006, stock prices dipped, corporate values ​​and public limited companies fell by 30% between 2001 and 2009, according to a study by researchers from the USC and the University of Michigan.

The 2012 paper concluded that the quotas had led to "younger and less experienced councils" which eventually degraded operational performance, "consistent with weaker advice".

Ms. Krawiec expressed her skepticism about the claims that female directors improve business performance, but said that it is possible that attention will eventually result in an increase in the number of women serving in the organization. of boards of directors.